Captive consumption exemption for machinery parts survived because the notification did not require duty-paid clearance of the complete machinery.

Machinery parts classifiable under Item 68 and used captively in the factory to manufacture replacement components for complete machinery qualified for full exemption under Notification No. 118/75-C.E. The notification extended relief to goods used for captive consumption and excluded complete machinery used in manufacture or processing, but it did not require the complete machinery in which the parts were used to have been cleared on payment of duty. Because the goods were only parts and not complete machinery, the exclusion did not apply, and the exemption remained available.

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Issues: Whether machinery parts used within the factory for manufacture of replacement components for complete machinery were entitled to full exemption under Notification No. 118/75-C.E., and whether the fact that the complete machinery was not cleared on payment of duty affected the exemption.

Analysis: The goods in question were machinery parts classifiable under Item No. 68 and used in the factory of manufacture. The exemption notification granted full relief to such goods used for captive consumption, while excluding complete machinery used for the manufacture or processing of goods. The notification did not require that the complete machinery in which the parts were used must itself have been cleared on payment of duty. Since the goods were only parts and not complete machinery, they did not fall within the exclusion.

Conclusion: The exemption was available and the Revenue's objection failed.

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